Sovereignty of the Air and a Brewing Trade War

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When it comes to crafting policy on the regulation of CO2 emissions, some people may say, “the sky’s the limit.” Recently it seems we have literally reached that limit: a war of sovereignty and trade is currently being fought not on the ground, but up in the air. For the first time, the European Union Emissions Trading Scheme (ETS) will now incorporate the regulation of aviation CO2 emissions.

During the Kyoto Protocol negotiations, the airline industry won an exemption from environmental regulations on the premises that air travel emissions are inconsequential when compared to other transport industries and that airline regulation would be too costly. Over the last two decades, however, things have changed as the aviation industry is now experiencing the fastest growth among industries in the transport sector. Today there are about 17,000 commercial planes around the world, representing 2% of all global greenhouse gas (GHG) emissions. The worldwide fleet is expected to roughly double to 36,000 aircraft by just 2025 and bring its GHG contributions to 3%. Those percentages may seem inconsequential; however, put in relative terms, just 36,000 aircraft are expected to contribute 3% of emissions while the the millions of cars on the road contribute only 13%That’s a big footprint for one vehicle.

Thus, the increasingly necessary regulation of aviation emissions has finally become a major topic in international discussion. Under the ETS plan, a market for carbon credits has been formed where airlines flying in EU airspace will be forced to limit emissions to allocated credits or buy more if they fly more. The main idea behind the plan is simple: try to use the least amount of your credits through embracing emissions efficiency. Strategies include using more modern, emission-efficient planes, flying better routes, or maximizing cabin capacity. Airlines are incentivized to adopt such policies by the possibility of accruing increased profits through the sale of unused credits to less efficient airlines.

However, two major flaws in the ETS plan are causing widespread international criticism today. First, the cost of a credit is calculated for the total length of the route that is flown, even if outside of EU airspace. Second, the scheme is forcing all airlines to comply, even those not in the EU. Combine these two points and it is quite understandable why such a furor is bubbling — especially among international airlines. In order to keep doing business in Europe, international airlines have to pay the carbon levy even while flying over their own sovereign airspace. A flight from Shanghai to Paris would have a company like China Southern Airlines paying, not only for its airtime over the EU, but also for its emissions accrued over Chinese airspace.

These rules set by the EU are causing major international repercussions, the most recent being the Chinese government’s order to its airlines to put on hold finalizing purchase contracts of 45 Airbus jetliners worth about $12 billion. Airbus parent EADS is feeling the pinch and pleading with EU regulators to revise the ETS rules. The issue is especially sensitive because the Chinese decision not only affects the giant plane maker, but trickles down to national EU governments which all have significant economic interests in the well-being of the company.

Opponents of the inclusion of non-EU airlines are right to claim that the EU is grossly over-stepping its boundaries. Yet, the requirement that non-EU airlines participate in the ETS is not what is truly bothersome. After the 9/11 attacks, the U.S. government imposed the September 11 Security Fee, mandatory for all airlines in order to provide more robust security measures for the nation’s airports. Airlines paid in order to “keep doing business” and the government was on solid legal ground since the mandate lay within its jurisdiction. On the other hand, the 27-nation bloc enforcing the ETS has no legal justification to violate other nations’ sovereignty. And if you’re wondering, yes, airspace is included in the definition of “sovereignty.” State behavior on the high seas has been governed for centuries by the ever changing and improving international maritime laws, (known as “admiralty laws”).

The same principle applies to the much younger aviation industry. The International Civil Aviation Organization (ICAO) is a United Nations institution tasked with implementing aviation norms and laws, as well as mediating disputes in this realm. This institution is the true supranational body of the aviation world with the legal jurisdiction to impose emissions rules fairly and equally on the behalf of all nations. If a plan, such as the ETS, were crafted by their hands it would not be receiving the vengeful backlash that the EU receives today. If real, practical solutions are to be found to abate aviation emissions, let the ICAO handle this delicate matter.With the ICAO at the wheel of aviation emissions regulation, we would not see the likes of China or India beginnning to start trade wars over issues which transcend national borders and affect all of humanity.